Download the PowerPoint slides

Aristides N. Hatzis
Associate Professor
Philosophy of Law & Theory of Institutions
Ph.D. (Law & Econ, U of Chicago)
Greece at a crossroads
What is at stake, and what to expect
Atlas Network Webinar
July 1, 2015
 1929-1936:
Anomalous political situation
 1936-1940: Dictatorship
 1940-1944: Word War II
 1944-1949: Civil War
 1949-1967: Illiberal Democracy
 1967-1974: Dictatorship
 1974- : Constitutional Democracy
1980: The 10th Member of the
European Communities
Greece circa 1980
public debt: 28% of GDP
deficit: < 3% of GDP
unemployment: 2-3%
average growth rate 1975-1980: 4.6%
inflation: 25% (due to the second oil crisis)
1981: PASOK
A modern Greek Tragedy
1981-2011: From Miracle to Nightmare

30 years of getting subsidies from the EU,
borrowing and spending

Minimal structural reforms

Anti-market bias

The state controlled about 75% of all business
assets

Bloated welfare state
Borrowed Happiness
 average
per capita income: $31,700
(2008)
–
25th in the world (95% to the EU average)
 private
spending: 12% more than the EU
average (2009)
 human
development and quality of life
indices: 22nd in the world (2010)
1980-2010: the road to default
 1980
public debt: 28% of GDP
 1990 public debt: 89% of GDP
 2009 public debt: 142.8% of GDP
–
almost 165% in late 2012
 1980
public deficit: <3% of GDP
 2009 public deficit: 15.4% of GDP
 1980
government spending: 29% of GDP
 2009 government spending: 53.1% of GDP
Greek Public Servants
Greek public debt (percentage of
GDP)
GREECE 2010

Public Debt: 142,8% of GDP
–
€350 billion ($ 500 billion)

Public Deficit: 15.4% of GDP

“Growth”: -4.5% of GDP
Like there is no tomorrow!
A bloated Welfare State…

Social benefits to households (percentage of GDP)
–
–
–
from 22.0% (2004) to 26%.4 (2008) to 29.0% (2009)
(from 2004 to 2009 “conservatives” ruled Greece)
half of it went to pensions


“social transfers” (subsidies to the pension funds of powerful
professional groups) equals 52% of this half – 6.34% of GDP in
2008.
EC pension projections (2009)
–
–
–
–
–
EU-27: 12.3% (2040) – 12.5 (2060)
Ireland: 6.4% (2040) – 8.6% (2060)
Portugal: 12.5% (2040) – 13.4% (2060)
Spain: 13.2% (2040) – 15.1% (2060)
Greece: 21.4% (2040) – 24.1% (2060)
An inefficient welfare state
 The
indicator of the efficiency of social
benefits in alleviating property is the worst in
the E.U. (13%, where the EU average is 35%
and some Scandinavian countries were as
efficient as 70%!).
 In
2002 the indicator was a poor 4% with a
EU average of 31%.
A helping hand to the rich

Extractive economic
institutions: Designed by the
politically powerful elites to
extract resources from the rest
of society.

Inclusive economic institutions:
Secure property rights, law and order,
markets and state support (public
services and regulation) for markets;
open to relatively free entry of new
businesses; uphold contracts; access
to education and opportunity for the
great majority of citizens, i.e., create
incentives for investment and
innovation and a level playing field.
The Greek trap







A bloated inefficient “welfare state”
but also
Tax evasion (as a social right)
A huge inefficient public sector
Corruption – essentially tolerated if not decriminalized
Public sector union power
Closed professions
Overregulation to ensure rent-seeking
“A state made for the welfare of politically powerful pressure groups”
Greek Extractive Institutions
Index of Economic Freedom
Long-term score change (since1995)
Low levels of trust






Government: 14,6% (51,7%)
Courts: 40,2% (52,6%)
Education system: 51,8% (66,1%)
Other people 16,5% (24,2%)
Philanthropy: 9% (28,9%)
Volunteerism 10% (20,9%)
Global average in parentheses
A political culture of
 Statism
 Protectionism
 Corruption
 Cronyism
 Nepotism
 Rent-seeking
 Irresponsible
spending
Greece is not a free-market
economy!
Mostly Unfree...




Index of Economic Freedom-2015: 130/178
– Last in the EU
Economic Freedom of the World-2014: 84/152
– Last in the EU
Global Competitiveness Report-2014/5: 81/144
– Last in the EU
ICC Open Markets Index: 48/75
– Last in the EU
Greece’s neighborhood
The Greek
Vikings*
Cost: €1725 bn
* Pelagidis &
Mitsopoulos 2011
1974-2005
171.600 regulations!
–
–
–
–
3.430 laws
20.580 presidential decrees
114.905 ministerial decisions
32.585 local government decisions
Institute for Regulatory Policy Research
IMF Default
They say, it’s our
country and
Greece...
What a shame!
GREXIT
Loony left to the Greek government:
Don’t put the silencer. Let’s deafen those capitalists!
Badly and urgently needed
 Regulatory
 Taxation
 Welfare
Reform
Reform
Reform
 Institutional
Reform
Conclusion
more market, more
growth, more jobs
Thank you!
[email protected]
http://www.phs.uoa.gr/ahatzis